New Poverty Measure in California Finds 2 Million Additional Poor

Researchers updated the federal tool for measuring poverty and found more Californians can't afford a basic standard of living.

More than 2.2 million people in California live in poverty but are not included in the official federal count of poverty estimates. That’s one of several findings in an October report by the Public Policy Institute of California, a nonpartisan think tank based in San Francisco. The institute’s researchers updated and modified the official federal poverty measure in an effort to better reflect the number of Californians in poverty.

The official measure, developed in the early 1960s, is widely considered outdated, in part because it assumes that the minimum level of income needed to get by would be three times the cost of food. That made sense in the 1960s, when food accounted for a third of a household budget, but now food is less than one-seventh of household costs.

“It’s better than nothing,” says Laura Speer, an associate director of policy advocacy reform for the Annie E. Casey Foundation. “But from the standpoint of wanting to have evidence-based policies, [alternative measurement] is pretty necessary. It’s important for government to see the impact of policy and how much need there really is.”

California isn’t the first state or local government to calculate an alternative poverty measure. New York City’s Center for Economic Opportunity published its own measure in 2008, as did researchers from the University of Wisconsin, Madison.

Today’s efforts to create alternative poverty measures originate with a 1995 report by the National Academy of Sciences. Even 18 years ago, poverty researchers within government agreed that the historical way of counting the poor was, in the report’s own words, “demonstrably flawed judged by today's knowledge; it needs to be replaced.” The report’s authors recommended that a new measure should include a broader range of income sources and a more nuanced picture of expenses. That meant calculating the value of public assistance benefits, such as food stamps and low-income home energy assistance; it also meant tallying the cost of child-support payments, out-of-pocket medical expenses and transportation. Unlike the official measure, the alternative would adjust for geographical differences in the cost of housing. The new California poverty measure is a descendant of those recommendations.

In 2011, California’s official poverty rate was 16.2 percent. But the state’s true poverty rate was about 22 percent, according to the Public Policy Institute. There were other differences. The official poverty rate among adults 65 and older was 9.6 percent, but almost twice as high -- 18.9 percent -- under the alternative measure. The group’s analysis also took into account the combined effect of safety net programs -- such as food stamps, the Earned Income Tax Credit and family cash assistance -- and found that the state’s overall poverty rate would be even higher, about 30 percent, in the absence of those public supports.

The report’s lead author, Sarah Bohn, spoke with Governing last week. The transcript that follows has been edited for clarity.

What do you see as the main takeaways of the report for state and local policymakers?

Our goal was to provide a better measure of poverty, something that's more accurate and up-to-date. The baseline takeaway for policymakers and the public is just how many people in California are poor under this better measure. We estimated that's about 22 percent, so that's about 8 million people in the state, and that's in 2011, which is pretty sobering. It's about 2 million more than you would expect based on official poverty rates, but we think it is a better estimate of how many people are in economic need. In order to address poverty, first you have to understand it.

California is not the first jurisdiction to come up with its own measure. Were there any other cities or states that you looked to as a model?

Our measure follows in a methodology that's been developed in the U.S. over the past 10 years. For the last two years, the Census Bureau has been releasing what's called the Supplemental Poverty Measure. Our work is based on a similar methodology, although it’s adapted for a few California-specific. There are a few states that have been working on similar poverty measures and we worked pretty closely with them to learn and contribute to current best practices. The particular places that we drew a lot on were the Wisconsin and New York City supplemental poverty measures. The Urban Institute has developed a similar measure for a few states, and just recently Virginia came out with a measure as well.

Are there any meaningful differences between your methodology and, say, what the Census does with its Supplemental Poverty Measure?

The biggest difference is that with the Census Supplemental Poverty Measure, even though they calculate it for California, it's on a three-year-average basis because they use a different data source (the Current Population Survey) -- which provides rich information about the resources that people have -- but is a relatively small sample. We use a different Census Bureau data set, the American Community Survey, that's much bigger, which allows us to calculate poverty more accurately for California in a given year (2011 in this case) and even within some regions of the state or some different demographic subgroups. The different base data source is where most of the differences stem from between our measure and the Census measure.

We have also supplemented the base data with administrative data from the California Department of Social Services to get accurate information on how many Californians participate in safety net programs (like CalFresh and CalWORKs, the state's food stamps and welfare programs). Those actual participation numbers are used in our measure to better estimate the additional resources families have from government programs, which is key to getting the overall poverty measure “right.”

Do you see this trend, where states come up with their own alternative measures, as something that will keep happening? Will every state eventually have its own measure?

I'm not sure. There are definitely states where supplemental poverty measures are easier to create. In a small state it's hard to have enough data to produce robust single-year or county-level estimates. The Census Bureau publishes its measure for every state, and I think there are many states interested in unpacking those numbers more, like we did in California, and like Wisconsin, Virginia, and New York City have done.

One of the most interesting parts of the report for me was the section on how different safety net programs are keeping some people either out of poverty or out of deep poverty. Was there some degree of intentionality there? Did you hope that policymakers would read that and say, Oh, I understand better the impact that these programs are having on the state's poor?

Our goal was to provide a comprehensive view of the resources that families have and the resources they need to make ends meet. And that includes benefits from government programs that are not incorporated at all in official poverty estimates, especially tax programs and in-kind benefits like food stamps, housing subsidies and school meals. Those are major investments by federal and state governments to try to reduce poverty (among other things), but we have no way of looking at all of them in context of each other and to see what poverty would look like with and without those resources. We weren't sure exactly what those results were going to be. We didn't know that it was going to be so huge: that if you excluded all of the resources from safety net programs that we're able to measure, there would be 40 percent of kids in California in poverty. It's a pretty striking number.

There's additional work that needs to be done to understand what would happen if we didn't have these programs at all or if we changed them substantially. What we've done so far is estimate the resources families actually have, and what they need to maintain a basic standard of living in California. We haven't yet estimated poverty in a hypothetical world where, for example, families didn't have access to food stamps at all, in which case they may make other choices about how they obtain resources, such as participating in other public programs or by working more.

Is there anything specific to California and its poverty rate that might not translate to other states?

California's participation in the CalFresh food stamps program is really low compared to other states. Our take-up rate usually ranks among the bottom if you look at the USDA estimates across states. The most recent estimates suggest that at least 40 percent of eligible Californians do not participate in the program. We were surprised to see that despite this low participation rate, CalFresh still has a sizeable impact on poverty, especially for children. It begs the question, if we could increase take-up, then how much more would CalFresh reduce poverty?